Hi. I have reviewed prior posts related to the question I am going to ask and would like confirmation of the following:

A profit sharing plan that has a 401(k) feature elects the 3% non-elective safe harbor for the 2002 calendar year. The plan uses a cross-tested method to allocate contributions. The plan is top-heavy. For the year, the employer makes the 3% fully vested contribution to all employees. The employer provides an additional 6% to its HCEs (which satifies 401(a)(4) requirements).

Please confirm that the plan has satified the top-heavy minimum benefit, the gateway minimum and the ADP test, i.e. does not matter what levels of salary deferral contributions have been made between HCEs and NHCEs.

Thank you.

Can anyone tell me how to do coverage testing for a 401k plan in the year of an open enrollment? Plan's eligibility requirement is 2 months of service, but the service requirement is waived for employees employed on date X. This is a brand new business and the HCEs have less than one year of service, so the otherwise excludable rule doesn't help me. If anyone knows where I can find an example of how to do the test that would be most appreciated - there was no example in the ERISA Outline Book.

Our client did a complete transfer of plan assets from one custodian to another. The transfer was in-kind - no disruption, etc. I am wondering though if this falls under the category of a 5% transaction, since it was 100%?

A union client called and asked questions relating to

his negotiation of a "stand alone" contract. The union

is in the construction industry and its plan is a multiemployer

arrangement. However, the contract in question is

negotiated with one large company that employs

several members of the union.

At some point in the past, the company agreed to

contribute to the union's multiemployer db plan on

behalf of its member/employees.

The db plan calculates a person's retirement benefit

by multiplying the years of credited and partial

service by a dollar amount ($90). Based on the

usual contribution amount of roughly $4.00 per

hour, a person needs to work approximately

300 hours to earn 1/4 credit.

Now the problem...

When the union negotiated this stand-alone

agreement several years ago, the parties

agreed to put only 20 cents per hour into

the plan. This means a person who works

2200 hours per year will never have sufficient

contributions to earn even a 1/4 credit.

Is this a situation where the trustees of

the plan could return the contributions

under a "mistake of fact/law" theory?

Has the union breached its duty of fair

representation by negotiating such a

deal?

Wouldn't this arrangement violate the

IRC/ERISA vesting and benefit accrual

rules?

I'm quite frankly not even sure where to

begin on this mess.

This is a theoretical question. The way a Roth IRA works is that initial contributions are taxed, but any growth of those contributions, no matter how great, is completely tax-free. So, could someone set up a Roth IRA, and invest in his own company, of which he has complete shareholder ownership, and then place the profits generated in the Roth IRA, by passing off cash as dividents on the stock? (of course, this assumes that one could run a profitable company, which most people can't do).

A friend of mine can't get paid. He is owed a commission from a boat he sold for a wealthy man in his neighboring town in Connecticut. No contract. He has email correspondence between himself and the buyer to help prove that he brokered the deal.

How can he get his money?

I inherited two ESOPs from an attorney who left our firm and have never dealt with them. Do they have to be restated for GUST? They are both prototypes. Does the 9/30 deadline apply to them?

I realize this is probably a dumb question, but I have to ask it.

I am not very educated on insurance in retirement plans so please pardon my ignorance but I have a few questions:

What do you do when the premiums paid on an employees life insurance policy for any given year exceed his annual contribution allocation in a profit sharing plan? (the employer pays the premiums)

Also, what exaclty is the incidental benefit limit and how do you calculate it?

I have a plan that terminated and all assets were disbursed in early 2003. Do I need to provide SARs for the 2002 plan year? All participants received notice that the plan was terminating in 2002 (i.e., NOIT and NOPB).

Technically, the DOL regulations do not provide for this exception, but from a practical stand-point it does not make sense to provide the SSA for 2002 or 2003.

If the EGTRRA amendment has been executed, is it required that the Employer adopt the POST EGTRRA amendment prior to the GUST rap? If so, is it best to adopt on the Sponsor level or the Employer level?

Thanks!

I just don't do much work with prototype plans, so any help here would be greatly appreciated.

A client has adopted a non-standardized prototype 401(k) plan that has received a favorable opinion letter. My client elected "W-2 wages" as the definition of compensation, but also elected the following adjustments to the definition: (i) include amounts that are not includible in gross wages under Code Sections 125, 132(f)(4), 402(e)(3), etc., (ii) exclude reimbursements or other expense allowances, fringe benefits, moving expenses, deferred compensation and welfare benefits, and (iii) exclude bonuses.

I've reviewed the regulations and it appears that adjustments (i) and (ii) preserve safe harbor status, but by excluding bonuses, this definition is not a safe harbor.

Annc. 2001-77 states that, unless otherwise provided, an employer cannot rely on a favorable opinion letter with respect to, among other things, Section 414(s). It also states that if an employer elects a safe harbor allocation formula and a safe harbor compensation definition, it can rely on an opinion letter with respect to 401(a)(4), 401(k) and 401(m). Because the client has not adopted a safe harbor definition of compensation, it apparently cannot rely on the opinion letter for those purposes. Does it therefore make sense to file for a determination letter, or is it not a big deal?

One other question: Annc. 2001-77 states that if the employer maintains or has ever maintained another plan covering some of the same participants, it cannot rely on the opinion letter with respect to Code Sections 415 or 416. My client has a defined benefit plan as well. Same question: Does it make sense to file the 401(k) plan?

Thanks!

Is a Schedule A required for a CCT filing as a DFE if the CCT invests in GICs? (Based on the directions for the Schedule A it does not appear that a CCT is required to file Schedule A.)

For billing purposes I am wanting a report designed with the following:

1. Number of participants deferring.

2. Number of participants not deferring (with a balance).

3. Number of distributions processed in the given time frame.

4. Number of loans processed in the given time frame.

5. Number of loans outstanding.

6. Number of insurance policies.

I talked to Corbel and they said it was possible but it would take too long and wouldn't do it. If there is anyone out there who would be interested in taking on this project for a fee please let me know.

Can a defined benefit plan invest in real estate?

A sole owner of a company has a defined benefit plan. He is the trustee. He wants to invest in pre-construction homes - buy them as they are being built, then turn around and sell them when completed. This is to be done, of course, in the name of the plan.

About 10-20% of the plan's assets would be used to do this.

Does this create a problem under ERISA, DOL, or PT rules?

Could someone please provide me the authority (besides the Form 5500 instruction, I am looking for the DOL Regulation cite) for the requirement that the Realized and Unrealized Gains on Form 5500 Schedule H be prepared on a "current value reporting" basis? I think this basis may also be referred to as "revalued cost reporting."

This FAQ seems to contradict earlier posts re 401(k) participants benefiting re gateway allocation. Might the distinction be between safe-harbor and regular 401(k)?

The Question: "In a cross-tested 401(k) plan, if a participant is eligible to defer and receives a match, but is not entitled to a profit sharing allocation, would he be entitled to receive a gateway allocation?"

The Answer: "No. PS contributions, elective deferrals and matching contributions separately must satisfy the nondiscrimination testing requirements. Treas. Reg. 1.401(a)(4)-2(b)(iii). The PS portion of the plan is the cross-tested portion. A participant eligible to defer or receiving a matching contribution, but not receiving a profit sharing allocation (including a top-heavy minimum contribution), is NOT benefiting from the cross-tested portion of the plan. Therefore the participant is not entitled to receive a gateway allocation."

Your thoughts? Thanks!

I've been told by a broker that Solo 401(k) plans or Uni-(k)s don't have to be updated for GUST. I thought all plans had to be updated for GUST, but since i don't work with many solo 401(k)s (and the ones i do work with are updated for GUST) I would appeal to higher ground. If anyone could confirm that Solo 401(k)s need or don't need to be updated for GUST, i would appreciate it. Thanks.

I'm polling people on their approach to accruing a benefit limited by section 415.

Suppose the participant will have 12 years of participation in a DB plan, retirement age is 62. She has 10 years of service prior to entering the DB plan.

She earns $240,000 per year and the benefit formula produces an unlimited benefit of $240,000 at retirement in 12 years. The benefit will accrue over years of plan participation.

Do you calculate her accrued benefit at the end of year 1 to be $240,000 x 1/12 = $20,000 and then limit this to $16,000 ($160,000 x 1/10) or do you calculate her accrued benefit as $160,000 (the $240,000 benefit limited) accrued over 12 years to arrive at $13,333?

Which way do you think is correct and why?

It is mandatory that all partners participate in the plan- including silent partners? Not addressing salary deferral, I know this is optional

Thanks

It is mandatory that all partners participate in the plan- including silent partners?